How is the French real estate market developing?
A market commentary by Anne-Isabell Carbonnières, head of representative office Paris
The French commercial real estate market continues to be characterised by pronounced uncertainty and structural adjustment. Following the sharp decline in transaction activity – with investment volumes in some cases around 50% below previous years’ levels – overall market momentum remains clearly subdued.
The primary driver of this development is the macroeconomic environment. Persistently high inflation and elevated interest rates have increased financing costs and triggered a broad repricing of real estate assets. As a result, buyers and sellers often remain far apart in their pricing expectations. Consequently, transactions are increasingly being postponed, leaving large parts of the market effectively stalled.
At the same time, developments vary significantly across asset classes:
Office:
The office market – traditionally the main driver of the French investment market – remains under pressure, particularly in Île-de-France. Take-up is declining (–9% in 2025), while large-scale transactions are largely absent. At the same time, supply is increasing significantly, with vacancy rates approaching the 10% mark. This development points to a oversupply, reinforced by changing occupier requirements (e.g. space optimisation and hybrid working models). While rental growth remains broadly stable, an increasing divergence between prime and secondary locations is becoming evident.
Logistics:
Following the dynamic years of the pandemic, the logistics market is undergoing an expected cooling and moving towards a new normal. At the same time, selective opportunities are emerging within the segment – particularly in last-mile logistics, driven by structural changes in retail.
Residential:
The residential investment market continues to prove comparatively resilient, benefiting in particular from stable demand in an uncertain environment.
Retail:
The retail market is stabilising selectively. Retail parks with price-oriented tenants are benefiting in particular from changing consumer behaviour (“trading down”), while dominant, professionally managed shopping centres are also showing solid performance.
Investment Market:
The current market phase marks a fundamental shift in investment strategy. Traditional core products at very high price levels are losing attractiveness. Instead, assets in prime locations with value-add potential are increasingly in demand. Active asset management is thus becoming a key driver of returns. Against this backdrop, it is clear that the era of cycle-driven investors relying primarily on market movements and passive holding strategies is coming to an end.
Outlook:
A sustained market recovery has yet to materialise. While some indicators show initial signs of stabilisation, overall developments remain fragile and highly dependent on external factors. Geopolitical uncertainties – most recently the conflict in Iran – have further slowed the emerging recovery. Combined with the still elevated interest rate environment, market developments remain difficult to predict.